The Public and the Price of Lunch

Citizens know that there is a connection between public services and taxes, writes Frank Fairbanks, but the connection is not clear or direct.

Frank Fairbanks was a GOVERNING contributor. He has served as city manager of Phoenix since 1990 and was named one of GOVERNING's Public Officials of the Year in 1994.

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In daily life, most government services are "free." Citizens know that there is a connection between public services and taxes, but the connection is not clear or direct. Citizens also know that the federal government runs very large deficits for years. Much of the public assumes that, like the federal government, other governmental units can create their own funding and that services will continue or even increase, even if tax revenues fall off. Some people assume that government services are a free lunch.

But reality intrudes. Like most cities, Phoenix is seeing record monthly declines in the sales-tax revenues that pay for the services the community cares about most. Budget shortfalls are growing rapidly. State law and the city charter prohibit deficit spending. While the deficit can be reduced by carefully drawing down balances and using financial tools, in the end spending and services must be cut, taxes and fees must be increased, or both.

So, how do we resolve the conflict between public assumptions and reality? By collaborating with the very community we serve.

For years, our city's approach has been to educate the community about budgets and to involve residents in creating solutions. From the start of the current economic decline, we have focused on full and open communication about revenues. We developed analyses and graphs that clearly demonstrate the decline. We discussed the situation with reporters, at city council meetings, on radio and television, on our Web site, with neighborhood groups--with anyone who would listen. This communication phase continued as we worked our way through the internal process to identify potential cuts and revenue increases.

With the shortfall documented, we moved to determine possible solutions. We produced lists of potential budget and service cuts that totaled more than the needed reductions. We also identified taxes and fees that could be used to increase revenues. Again, we focused on communication with the public.

Early in the process, the city council made it clear that it could not support major tax or fee increases. Council members were mindful of the financial distress of the community, and it made no sense to solve our problem by causing more economic pain in the community. However, no new revenue meant that the budget shortfall needed to be met by cutting costs and, therefore, services.

We were committed to acting promptly and not allowing the process to become mired by indecision. The sooner we cut the budget, the smaller the size of the cut. This is true because prompt action reduces the size of the deficit hole that needs to be filled. Implementing the reductions sooner also increases the savings and allows them to work over a longer period of time.

Using the criteria of trying to protect direct services to the community while retaining the ability of the organization to be effective in the long term, staff proposed a total of $70 million in cuts in all general-fund departments. We disseminated our proposal to the community using every possible outlet. The city printed an eight-page newspaper tabloid discussing the possible cuts and distributed it to homes in the Sunday newspaper.

We also scheduled 12 community meetings in neighborhoods throughout the city. We publicized the meetings on radio and television, in the newspaper, in neighborhood newsletters and on the Internet. At the meetings, we briefly explained the need to cut the budget, and every attendee received a copy of the tabloid summary of possible cuts. Every person was allowed to voice their perspective on the budget cuts and offer their suggestions and solutions.

Through this process, residents came to understand the real problem. The public listened to each other as much as they listened to us. People tend to support their personal interests, but in these meetings they had to listen to other residents whose concerns differed from their own when it came to cutting services. And although they might still be partial to their favorite issue or department, they saw balance in the proposed cuts and that the cuts were developed fairly. They saw that we were trying to minimize the impact on the public. Importantly, the public also suggested some excellent alternative cuts and some fee increases to prevent cuts.

This series of meetings allowed us to use public input to significantly revise our list of proposed cuts. Several fee increases proposed by the public were adopted to preserve some key services. The public support that had already been established made these fee increases viable. In some cases, cuts were rescinded because the community demonstrated a consensus about the importance of these items. Continued economic deterioration forced an even higher level of cuts.

At the final public meeting, convened to adopt the revised cuts, only three speakers from the community came forward. All three were upset that the cuts were necessary, but they praised the decision-making process and supported the final fee and service-cut decisions. The city council unanimously approved a package of cuts that had benefited from the public's active input. The cuts amounted to $90 million.

In the end, we found that the people of the community are willing to pay a fair price for their lunch if they are given a real chance to decide what they are served.